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Industry: Business Services
Earnings for the sector grew 10.6% in the fourth quarter faring better than the overall 9.4% growth for the S&P 500. The Q4 earnings growth was an improvement over 8.6% growth in the third quarter. Revenues showed an improvement of 5.6% faring much better than the S&P 500's year-over-year average of 0.8%. Revenue growth also improved sequentially.
In terms of surprises, the sector's performance was weaker than the broader market, with 42.9% of Business Services companies beating earnings expectations compared with the 'beat ratio' of 64.3% for the S&P 500 as a whole.
Looking ahead, 2014 and 2015 earnings are expected to improve 12.3% and 13.7% respectively. This compares favorably to the +8.1% and 11.6% growth for the S&P 500 in 2014 and 2015.. Revenue growth is expected at 4.9% for 2014 and 6.1% for 2015 for the sector compared with a minimal improvement of 1.1% and 2.2% for the respective years for the S&P 500. The Zacks Business Services sector as a whole accounts for 3.2% of the S&P 500 index's total market capitalization and is expected to bring in roughly 2.3% of the index's total earnings in 2014.
For a detailed look at the earnings outlook for the Business Services and other sectors, please check our weekly Earnings Trends report.
Considering Zacks Rank, share prices, earnings surprise history and future growth prospects we think the following two stocks can enrich ones portfolio.
Exlservice Holdings, Inc. (Nasdaq:EXLS-Free Report): This provider of business process solutions, utilizing operations management, analytics and technology primarily in
The growth drivers include new relations signed with initial scope of several million dollars in annual contract value once implemented. The company also continues to benefit from strong secular demand. U.S.-based health insurance will continue to experience rising volumes, pressure to improve patient outcomes and a need to comply with regulatory change.
The company also engages in share buyback that down the line would enhance shareholder value.
ExamWorks Group, Inc. (NYSE:EXAM-Free Report): This provider of independent medical examinations (IMEs), peer and bill reviews,
The company continues to benefit from market share gains that lead to superior organic revenue growth, technology solutions that drive operating leverage and expanding margins, and considerable cash flow. Its compelling inorganic growth story is also expected to boost its performance level.
Both these stocks carry a Zacks Rank #2 (Buy).
Stocks to Avoid
CoreLogic, Inc. (NYSE:CLGX-Free Report): This provider of property, financial and consumer information, analytics, and services in
The company posted negative surprise with an average of 1.1% over the last four quarters. The underperformance was reflected in share price, which declined 10.6% year to date.
Clean Harbors Inc. (NYSE:CLH-Free Report): This provider of environmental, energy, and industrial services primarily in
In mid-January, the refining majors led by
Both these stocks carry a Zacks Rank #5 (Strong Sell).
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